Public beliefs and corruption in a repeated psychological game

This paper investigates the role of guilt aversion for corruption in public administration. Corruption is modeled as the outcome of a game played between a bureaucrat, a lobby, and the public. There is a moral cost of corruption for the bureaucrat, who is averse to letting the public down. We study how the behavior of the lobby and the bureaucrat depend on perceived public beliefs, when these are constant and when they are allowed to vary over time. With time-varying beliefs, corruption is more likely when the horizon of the game is relatively long and when public beliefs are initially low and are updated fast.psychological games, corruption, bureaucracy, guilt, third party

Gender, Competition and the Efficiency of Policy Interventions

Recent research has shown that women shy away from competition more often than men. We evaluate experimentally three alternative policy interventions to promote women in competitions: Quotas, Preferential Treatment, and Repetition of the Competition unless a critical number of female winners is reached. We find that Quotas and Preferential Treatment encourage women to compete significantly more often than in a control treatment, while efficiency in selecting the best candidates as winners is not worse. The level of cooperation in a post-competition teamwork task is even higher with successful policy interventions. Hence, policy measures promoting women can have a double dividend.competition, gender gap, experiment, affirmative action, teamwork, coordination

Taking uninformed consumers for a ride

Evidence from 400 taxi rides in Athens shows when providers overcharge for their services, writes Loukas Balafouta

Essays in applied and psychological game theory: cooperation, corruption and political economy

The first chapter of the thesis applies game theory in order to examine the question of income redistribution from a fresh angle. In particular, it considers a mechanism of patron-client relationships which enables a society's rich class to limit the extent of redistributive taxation. In effect, the aim of patronage is to "buy" the votes of some poor citizens and lower the demand for redistribution. Income tax rates are further shown to depend negatively on government corruption in the form of fund capture, provided that a democratic regime is in place and the government cares about reelection. This link is tested empirically using cross country data and the evidence is consistent with the predictions of the model.The second and third chapters shift the focus of attention towards the process of decision making in games and the role of emotions in this process. Corruption, which is taken as exogenous in the first chapter, is now considered in detail as the outcome of a cooperation game between two players, with a third player (or "third party") having a stake in the outcome of the game but no opportunity to take any direct action. This situation is analysed using psychological game theory. Players' utility functions are extended to include beliefs and the emotions that these generate. In the theoretical model of the second chapter the emotion of interest is guilt and this is conditioned on the perceived beliefs of the third party. The two players are then less likely to collude if they believe that the third party expects a favourable outcome for herself. The model solves for the conditions under which collusion emerges in equilibrium. The main assumption of the model (i.e. the role of beliefs in decision making) as well as some of its predictions are then tested using an economic experiment in the third and final chapter of the thesis. The experimental findings strongly support the impact of beliefs on the incidence of collusion: Perceived expectations of the third party about the outcome of the game appear to be the most significant factor that determines the outcome itself. There seems to be a mechanism of self-fulfilling expectations which can be applicable to a number of economic situations, including corruption in public administration

What Drives Taxi Drivers? A Field Experiment on Fraud in a Market for Credence Goods

Credence goods are characterized by informational asymmetries between sellers and consumers that invite fraudulent behavior by sellers. This paper presents the results of a natural field experiment on taxi rides in Athens, Greece, set up to measure different types of fraud and to examine the influence of passengers’ presumed information and income on the extent of fraud. Results reveal that taxi drivers cheat passengers in systematic ways: Passengers with inferior information about optimal routes are taken on longer detours while asymmetric information on the local tariff system leads to manipulated bills. Higher income seems to lead to more fraud.credence goods, expert services, natural field experiment, taxi rides, fraud, asymmetric information

What Drives Taxi Drivers? A Field Experiment on Fraud in a Market for Credence Goods

Credence goods are characterized by informational asymmetries between sellers and consumers that invite fraudulent behavior by sellers. This paper presents the results of a natural field experiment on taxi rides in Athens, Greece, set up to measure different types of fraud and to examine the influence of passengers' presumed information and income on the extent of fraud. Results reveal that taxi drivers cheat passengers in systematic ways: Passengers with inferior information about optimal routes are taken on longer detours while asymmetric information on the local tariff system leads to manipulated bills. Higher income seems to lead to more fraud.fraud, taxi rides, natural field experiment, expert services, credence goods, asymmetric information

What drives taxi drivers? A field experiment on fraud in a market for credence goods

Credence goods are characterized by informational asymmetries between sellers and consumers that invite fraudulent behavior by sellers. This paper presents the results of a natural field experiment on taxi rides in Athens, Greece, set up to measure different types of fraud and to examine the influence of passengers’ presumed information and income on the extent of fraud. Results reveal that taxi drivers cheat passengers in systematic ways: Passengers with inferior information about optimal routes are taken on longer detours while asymmetric information on the local tariff system leads to manipulated bills. Higher income seems to lead to more fraud.Credence goods, expert services, natural field experiment, taxi rides, fraud, asymmetric information

Revealed Distributional Preferences: Individuals vs. Teams

We compare experimentally the revealed distributional preferences of individuals and teams in allocation tasks. We find that teams are significantly more benevolent than individuals in the domain of disadvantageous inequality while the benevolence in the domain of advantageous inequality is similar across decision makers. A consequence for the frequency of preference types is that while a substantial fraction of individuals is classified as inequality averse, this type disappears completely in teams. Spiteful types are markedly more frequent among individuals than among teams. On the other hand, by far more teams than individuals are classified as efficiency lovers

Equality, Equity and Incentives: An Experiment

We devise a new experimental game by nesting a voluntary contributions mechanism in a broader spectrum of incentive schemes. With it, we study tensions between egalitarianism, equity concerns, self-interest, and the need for incentives. In a 2x2 design, subjects either vote on or exogenously encounter incentive settings while assigned unequal incomes that are either task-determined or random. We find subjects’ voting to be mainly self-interested but also influenced by egalitarian and equity concerns, which sometimes cut in opposite directions. Contributions, which seem mainly determined by boundedly rational responses to incentives, are influenced by egalitarian, equity and strategic considerations.equality, efficiency, voluntary contribution mechanism, incentives, experiment

Rehabilitation and social behavior: Experiments in prison

Despite the economic and social significance of crime reduction and criminals’ rehabilitation, research evaluating the effects of incarceration on behavior is surprisingly scarce. We conduct an experiment with 105 prison inmates and complement it with administrative data in order to explore several aspects of their social behavior. We first perform a comprehensive analysis of behavior in three economic games, finding evidence of discrimination against a sample from outside prison. In addition, our regression analysis reveals that inmates generally become less pro-social towards this out-group the longer they remain incarcerated. Finally, we introduce and evaluate a priming intervention that asks inmates to reflect on their time spent in prison. This intervention has a very sizeable and significant impact, increasing pro-sociality towards the out-group. Hence, a simple, low-cost intervention of this sort can have desirable effects in promoting rehabilitation and integration into social and economic life after release